Poland: the next gas superpower?

WARSAW, Poland — An unprepossessing steel frame tower in a green field in northern Poland has become a favorite stop for politicians and is fueling dreams of enormous wealth and independence.

The reason is that the tower belongs to Canada's Lane Energy and is being used to drill for shale gas, an unconventional form of natural gas that could be present in enormous quantities in ancient rocks running under Poland.

“Everyone is keen to hear we may be a second Texas,” said Jacek Jezierski, Poland's deputy environment minister and chief geologist.

The prospects are certainly enticing. Poland may have as much as 1.5 trillon to 3 trillion cubic meters of shale gas — similar to Iraq's natural gas deposits.

As the drilling begins, the prospects are making Poles salivate. Radoslaw Sikorski, the foreign minister, said that within 10 to 15 years, Poland may become an enormously wealthy state, another energy giant like Norway, thanks to the gas.

But the operative word is “may.” U.S. companies, including Marathon Energy and ExxonMobil, have exploration concessions from the Polish government because the geological structures under Poland are similar to structures in the United States that are rich in unconventional gas, but until test wells are drilled and Poland is more fully explored, no one really knows what Poland's reserves will be.

“The gas is probably there, but to say that with certainty I need documentation,” Jezierski said, adding that it will take as long as five years before Poland has a good sense of the size of its deposits, and more than a decade for any gas to actually come on-stream.

The assessment comes from U.S. companies who have taken a look at the basic geological structures in Poland, which are similar to areas of the United States where gas has also been found.

Larry Archibald, senior vice president in charge of exploration at ConocoPhillips, a partner of Lane Energy in Poland, recently told analysts: “We're leveraging our considerable North American shale gas and coalbed methane gas experience and taking it overseas. So we are an early mover in Poland.”

The gamble is worth taking because unconventional gas has proved to be a bonanza for the United States. After decades of very expensive exploration and research, a group of mid-sized U.S. energy companies cracked the puzzle of how to extract gas trapped in small quantities in rock formations deep underground. The technology shatters the rock with high-pressure water.

The effect has been revolutionary. Just a few years ago the United States was expecting to become a net gas importer, leading to the construction of ports capable of accepting deliveries of liquefied natural gas to keep up with future demand. Instead, the United States is now awash with gas, and plans are now to covert the LNG terminals for export instead of import.

Poles are excited at the prospect of repeating the U.S. experience, as their country has the largest potential shale deposits in Europe, with 12 percent of the country sitting on shale formations.

The main goal would be to end the country's dependence on Russian gas — which now accounts for about two-thirds of Poland's gas needs (gas accounts for about 10 percent of the energy used in Poland).

Importing gas from Poland's old imperial master is politically very sensitive. The government is now negotiating a new contract with Russia's Gazprom that would last until 2037, something that the opposition has strongly criticized for endangering Poland's independence.

“There is a great desire in Poland to have energy independence,” Jezierski said.

But the obstacles Poland has to overcome before becoming a gas superpower are still enormous.

If the gas is in fact there, it will have to be found in large enough deposits to make commercial sense.

The legal conditions in Poland are also very different from those in the United States. Environmental rules in the European Union are much tougher than in the United States, and even their opposition to the possible danger to water quality from mining operations is growing.

In the United States, mineral rights usually belong to the owner of the surface property, which encourages property owners to explore for mineral wealth. In Europe, such deposits usually belong to the state, which makes owners much less enthusiastic about pursuing mining operations.

Also, the very expensive infrastructure needed to extract the gas is missing in Europe. There are more than a thousand gas drilling rigs in the United States, while there are less than a hundred in Europe.

Finally, the technology needed to extract the gas was developed by American companies, and they will have to take the lead in any eventual gas development in Poland, something that is already causing controversy. Jaroslaw Kaczynski, leader of the conservative opposition Law and Justice party (normally very pro-American), has warned about handing Poland's mineral wealth to foreigners who will make money off it, leaving Poland with nothing.